Oil prices strike one-month lows on poor US data
Oil prices dived on Wednesday to one-month lows on the back of more weak data in key crude consumer the United States and tumbling European stock markets.
Brent North Sea crude for September delivery slumped to a one-month low at $113.50 per barrel. It later stood at $113.98, down $2.48 from Tuesday's closing level.
New York's main contract, light sweet crude for delivery in September, dived to a five-week nadir at $91.75 a barrel, before pulling back slightly to $92.11, down $1.68 from Tuesday.
"Fears that the US economy is starting to slow down, after this afternoon's economic data, is prompting fears of a drop off in demand for oil as growth starts to slip back," said CMC Markets analyst Michael Hewson.
European stock markets dived poor US economic data and mounting concern over the eurozone debt crisis. Frankfurt fell 2.30 percent, London lost 2.34 percent and Paris dropped 1.93 percent in value.
In the United States, the Institute for Supply Management said its non-manufacturing purchasing managers' index slipped to 52.7 in July from 53.3 in June.
Forecasters surveyed by Dow Jones Newswires had expected last month's PMI to be little changed at 53.5 points.
The latest level was the lowest since February 2010, and ISM data also showed that the critical US service sector grew at a snail's pace as the overall economy appeared to be stalling.
"The modest drop in the US ISM employment index in July, to 52.7 from 53.3, suggests that the economy is not slipping into a recession but instead that growth is very weak," said Capital Economics analyst Paul Dales.
He added: "The key point is that, at the start of the third quarter, there have been few signs of a rebound in economic growth."
Separately, the US government's Department of Energy announced that American crude reserves rose by 1.0 million barrels in the week ending July 29. Market expectations had been for a larger increase of 1.7 million barrels.
Oil prices had also retreated sharply on Tuesday on dismal data, despite news of a pact to increase to the US government's debt ceiling in a deal that ended worries of a sovereign default by the world's biggest economy.
Official data on Tuesday had showed US consumer spending declined in June, the first drop in nearly two years.
Analysts said a resurgence in concerns that the eurozone debt crisis remains a real threat to Italy and Spain added to the negative tone.
"Economic concerns have overshadowed the US debt deal with regards to oil prices," said Gary Hornby, an analyst at energy research group Inenco.
"The focus has now shifted to the poor recent economic data for the US, China and the UK, coupled with the eurozone debt crisis and the potential drop in the US credit rating."
© 2011 AFP